Home renovations are a great way to improve the value of your home while also improving the look and functionality. Whether you are considering a new bathroom, adding on a garage or renovating your entire kitchen, it is important to understand how that project will impact the value of your home. If you think you will be selling your home soon, however, Marble Concepts offers these tips to be sure your renovation will not only make your home more attractive and functional but that you will also be able to recover some of what you spend on the project.
There is no question that renovations can increase what is known as the return on investment (ROI) but there are things you need to remember before you begin tearing out walls. In order to recover costs, the project must either fix a design or structural flaw to earn back the entire cost of construction. It is important that the renovation not improve your home significantly above the average value of the homes in your neighborhood. If you are considering renovating a rental home, you may actually be able to increase rental rates as well as recover costs if you choose to sell.
Real Estate Market
Before you decide to renovate, you will need to review the real estate market where the property is located. You will also want to be sure the work is of good quality in order to get the best ROI. There are some projects, like wooden decks, manufactured stone veneer and window replacements that have historically offered the best ROI when you decide to sell. Kitchen and bathroom renovations have also had a fairly high ROI, depending on the level of renovation you choose. If the renovation fixes a design flaw, such as a bedroom that has no closet, you will more than likely see a high ROI as well.
Location, Location, Location
Take a look around your neighborhood and view some of the sale prices for homes near you to determine what the market may yield. One mistake many homeowners make is improving their home above the market rate. When a buyer looks at a neighborhood, it is usually because of amenities nearby that they need, such as good schools, commute to work or shopping options. Although they may want to purchase a home that offers expensive upgrades, they may not want to pay for those upgrades. Your geographic location will also determine which upgrades will provide the best ROI. In cooler climates, a swimming pool that can only be used a few months out of the year may not entice buyers to spend extra on your home. However, if you live in a hotter climate where a pool could be used all year, it may be worthwhile for a buyer to pay a higher price for a home with a pool.
One thing to look at when you are considering upgrades to your home is whether that upgrade will still hold value years down the road. Adding on an addition for a family room or finishing an attic space into a bedroom will add value longer than replacing your air conditioner or installing wood flooring. Air conditioners, flooring as well as kitchen and bath changes are often based on trends and technology that can become obsolete over time.
Average Renovation ROI
Remodeling.com offers what they call a Cost vs. Value Report each year that provides information about ROI for the most common renovation projects. These are based on the current residential market, the average cost of construction and real estate fundamentals. Some of the ROI averages listed recently include:
- Bathroom Addition – 55 percent
- Bathroom Remodel – 57 to 64 percent
- Deck Addition – 67-72 percent
- Entry Door Replacement – 69 percent
- Garage Door Replacement – 97 percent
- Grand Entrance – 53 percent
- Kitchen Remodel – 59 to 78 percent
- Manufactured Stone Veneer – 96 percent
- Master Suite Addition – 52 to 54 percent
- Roofing Replacement – 61 to 66 percent
- Siding Replacement – 75-78 percent
- Window Replacement – 69-72 percent
- Wood Deck Addition – 80-85 percent
Of course, the level of renovation will impact how much of an ROI you receive. A major kitchen remodel costing over $124,000, for example, may provide you an ROI of just 54 percent while mid-range renovation costing just half that could result in an ROI of 59 percent. As you can see, this example shows that “bigger is not always better.” Home prices reflect the taste of buyers in a particular market. If you are considering a renovation and know you will be selling your home not long after that renovation is completed, it is important to research how the changes to your home will impact its selling price.
Paying for Renovations
If you have equity in your home, you can pay for a major renovation using a cash-out refinance or home equity loan. The only cash you would need to spend is for the interest on the loans which are often tax-deductible. When you sell the property, you can pay the balance on the loan. There may be grants available from the federal government as well which would lower the out-of-pocket costs, but these are often only for people with low incomes and who live in the home they are renovating.
If you are considering renovations on your home, contact Marble Concepts to see how they can help. With almost 40 years’ experience, there is nothing they cannot make from stone and they are ready to “set your ideas in stone.” Using products brought from the best stone producing regions around the world, Marble Concepts brings your ideas and designs to life. Learn more by calling today or fill out the easy contact form online. We can help guide you through the process and give you the renovation of your dreams.